Huish Detergents v. Warren County

• Decision Date: 27 April 1999
• Docket Number: No. 98-5566,98-5566
• Citation: 214 F.3d 707
• Parties: (6th Cir. 2000) Huish Detergents, Inc., Plaintiff-Appellant, v. Warren County, Kentucky; Monarch Environmental Inc., Defendants-Appellees Argued:
• Court: U.S. Court of Appeals — Sixth Circuit

Page 707

214 F.3d 707 (6th Cir. 2000)

Huish Detergents, Inc., Plaintiff-Appellant, v. Warren County, Kentucky; Monarch Environmental Inc., Defendants-Appellees

No. 98-5566

UNITED STATES COURT OF APPEALS FOR THE SIXTH CIRCUIT

Argued: April 27, 1999

Decided and Filed: May 31, 2000

Appeal from the United States District Court for the Western District of Kentucky at Bowling Green. No. 97-00123--Joseph H. McKinley, Jr., District Judge.

Frank F. Chuppe, Cynthia B. Doll (briefed), Walter M. Jones (argued & briefed), WYATT, TARRANT & COMBS, Stephen D. Berger (briefed), WYATT, TARRANT & COMBS, Louisville, Kentucky, for Appellant.

Michael E. Caudill, Bowling Green, Kentucky, for Appellees.

Dennis J. Conniff, Larisa E. Gilbert, BROWN, TODD & HEYBURN, Louisville, Kentucky, for Appellees.

Before: RYAN, BATCHELDER, and CLAY, Circuit Judges.

RYAN, J., delivered the opinion of the court, in which BATCHELDER, J., joined. CLAY, J. (pp. 717-18), delivered a separate concurring opinion.

OPINION

RYAN, Circuit Judge.

Huish Detergents, Inc., challenges an ordinance enacted by Warren County, Kentucky, and a franchise agreement entered into by Warren County and Monarch Environmental, Inc., pursuant to which Monarch is the exclusive contractor for collecting and processing all the solid waste generated in the city of Bowling Green, Kentucky. Huish's claim is that the ordinance and companion agreement violate both the so-called "dormant" Commerce Clause of the United States Constitution and the Kentucky Constitution. The district court dismissed the suit under Fed. R. Civ. P. 12(b)(6) for failure to state a claim upon which relief may be granted. Because we hold that the district court erred in dismissing Huish's Commerce Clause claim, we reverse.

I.

Warren County, Kentucky, issued a Request for Proposal (RFP) and considered competitive bids from trash haulers interested in collecting and processing all municipal solid waste in Bowling Green, Kentucky. The County awarded the contract to Monarch and formalized the relationship in a written "franchise agreement." Under the franchise agreement, Monarch has the exclusive right for five years (1995-2000) to collect and process all municipal solid waste generated in Bowling Green. Monarch is obligated to operate the city's transfer station to process the waste it collects and must dispose of all waste at a landfill "approved and permitted by the State of Kentucky," effectively prohibiting the use of out-of-state disposal sites. The agreement can be renewed for three terms of five years each and will renew automatically for a five-year term absent prior notice by one of the parties.

The franchise agreement provides that all residential, commercial, and industrial entities that generate municipal solid waste in Bowling Green must employ Monarch to remove that waste; waste generators may not remove their own waste, and they are prohibited from using any company other than Monarch. Monarch bills its Bowling Green customers directly according to a fee schedule fixed by the franchise agreement; Monarch is solely responsible for collecting payment. The County receives a portion of the revenues Monarch generates servicing Bowling Green businesses and residents, and Monarch removes the waste generated at the County's own buildings at no charge.

On the same day that the franchise agreement became effective, the County passed an ordinance "executing" the franchise agreement and incorporating its provisions by reference. In essence, the ordinance transforms the franchise agreement provisions into law.

Huish operates a laundry detergent manufacturing facility in Bowling Green. Not surprisingly, this facility generates considerable solid waste. Under the ordinance and franchise agreement, Huish must use Monarch to remove this waste. Huish filed this lawsuit seeking to invalidate the County's ordinance/franchise scheme, claiming that the scheme violates the Commerce Clause , 42 U.S.C. 1983, and section 164 of the Kentucky Constitution.

The district court dismissed Huish's complaint pursuant to Fed. R. Civ. P. 12(b)(6). The court first concluded that the County is not entitled to Eleventh Amendment immunity and that Huish has the requisite standing to bring suit. With respect to the Commerce Clause claim, the court took the view that the County engaged in two separate challenged activities: (1) "taking over" the local waste collection, processing, and disposal markets; and (2) granting Monarch the exclusive right to collect, process, and dispose of waste generated in Bowling Green.

The court began its analysis of Huish's Commerce Clause claim by examining the County's decision to prohibit residents from independently purchasing waste collection, processing, or disposal services on the open market, which the court described as the County's "takeover" of the local waste collection market. The court held, as a preliminary matter, that the County was not acting as a market participant in taking this action and, therefore, its action was subject to Commerce Clause restrictions. Proceeding with a "dormant Commerce Clause" analysis, the district court concluded that the County's "takeover" of Bowling Green's waste collection, processing, and disposal market did not violate the dormant Commerce Clause. The court reasoned that the "takeover" did not discriminate against interstate commerce and that the burden imposed on interstate commerce was not excessive in relation to the benefits for the County.

As to the second issue, the district court concluded that the County acted as a market participant in awarding an exclusive franchise to Monarch. According to the district court, the County "purchased" waste removal and processing services and was free to choose Monarch as the County's provider of these services. In light of its conclusion that the market participant exception applied, the district court did not address whether the franchise agreement with Monarch ran afoul of the Commerce Clause.

The court then dismissed Huish's federal claims with prejudice and its pendent state law claim without prejudice. This appeal followed.

II.

A. STANDING

At the outset, we must address the defendants' contention that Huish lacks standing to bring this action. The defendants claim that, inasmuch as Huish is not a member of the solid waste industry, its injuries do not fall within the zone of interests protected under the Commerce Clause. The district court concluded that Huish has standing, and we agree.

In cases such as this involving a constitutional claim, the plaintiff must satisfy two tests for standing: first, it must meet basic Article III constitutional requirements; and second, the plaintiff's injury must fall within the "zone of interests" protected by the constitutional guarantee.

To establish Article III standing, Huish must demonstrate: (1) an injury in fact that is actual or threatened; (2) a causal connection between the defendants' conduct and the alleged injury; and (3) a substantial likelihood that the injury will be redressed by a favorable decision. Lujan v. Defenders of Wildlife, 504 U.S. 555, 560-61 (1992); Coyne v. American Tobacco Co., 183 F.3d 488, 494 (6th Cir. 1999). "At the pleading stage, general factual allegations of injury resulting from the defendant's conduct may suffice, for on a motion to dismiss we presum[e] that general allegations embrace those specific facts that are necessary to support the claim." Lujan, 504 U.S. at 561 (internal quotation marks and citation omitted) (alteration in original).

We find that Huish satisfies the requirements for standing under Article III, and, indeed, the defendants do not argue otherwise. Huish alleged an actual injury as a result of the County's ordinance and agreement with Monarch, in consequence of which Huish is forced to pay Monarch more to collect, process, and dispose of its waste than Huish would spend if it could purchase one or more of these services from a company operating out-of-state or perform the work itself. The fact that Huish is not a member of the waste industry does not undermine the causal connection between the challenged scheme and Huish's injury as a consumer.

[C]ognizable injury from unconstitutional discrimination against interstate commerce does not stop at members of the class against whom a state ultimately discriminates, and customers of that class may also be injured, as in this case where the customer is liable for payment . . . and as a result presumably pays more for the [product] . . . . Consumers who suffer this sort of injury from regulation forbidden under the Commerce Clause satisfy the standing requirements of Article III.

General Motors Corp. v. Tracy, 519 U.S. 278, 286 (1997). Finally, Huish's injury can be redressed with a favorable result.

Huish must also satisfy a prudential limitation on our jurisdiction--a further standing requirement--by showing that the interest it seeks to protect "arguably fall[s] within the zone of interests protected or regulated by the statutory provision or constitutional guarantee invoked in the suit." Bennett v. Spear, 520 U.S. 154, 162 (1997); see also Association of Data Processing Serv. Orgs., Inc. v. Camp, 397 U.S. 150, 153 (1970). In this case, the constitutional guarantee arises under the Commerce Clause, which is designed to prevent economic protectionism and insure the free movement of goods between State borders, prohibiting "laws that would excite . . . jealousies and retaliatory measures" among the several States. C & A Carbone, Inc. v. Town of Clarkstown, New York, 511 U.S. 383, 390 (1994).

Huish argues that it meets this additional standing requirement because it has pleaded an injury that falls within the zone of interests protected by the Commerce Clause, and we agree. Huish seeks to protect its right to contract with a company that can transport its waste for out-of-state processing and/or disposal. In making this claim, Huish is...